Suretyship

Legal Meaning

Suretyship is accessory to the principal debt; a valid principal debt is, as a rule, required. In simple suretyship, apart from statutory exceptions, the creditor must first proceed against the principal debtor, whereas in joint and several suretyship the possibility of proceeding directly against the surety is broader under the conditions in the law.

The surety’s liability is limited to the maximum amount stated in the contract; the scope of the principal debt, interest, enforcement costs and other items is determined according to the law and the text. For suretyships given by natural persons, the provisions on duration, spousal consent and form are of mandatory importance.

The spouse’s written consent must, as a rule, be obtained before the contract or at the latest at the time it is concluded. A court judgment of separation or the legal right to live apart, and the commercial and professional exceptions under TBK Article 584/3, are assessed separately. Exceptions such as a suretyship by a company shareholder or manager in connection with the company cannot be extended without limit to every commercial suretyship.

A suretyship given by a natural person, under TBK Article 598, as a rule ends automatically ten years after its creation; the extension conditions provided by law are reserved. For personal security given by natural persons under another name as well, the protective provisions on form, capacity and spousal consent apply under TBK Article 603.

Core Elements and Practical Criteria

• It is subject to written and qualified form.
• The maximum liability amount must be stated.
• It is personal security accessory to the principal debt.
• Simple and joint and several suretyship produce different results.

Practical Significance

Before the text of the suretyship is signed, the upper limit of liability, the scope of the debt, the duration, joint and several liability and the conditions of spousal consent should be examined. Personal security arranged under another name may also be subject to the provisions on suretyship by law.

Commonly Confused Concepts

• Suretyship is personal security; a pledge provides real security over a specific asset value.
• A guarantee agreement may give rise to an independent obligation; what is decisive in the distinction is not the name of the transaction but its real content.

Practical Example

The fact that the text of a personal security signed by a shareholder for a company’s debt bears the title ‘guarantee’ is not sufficient by itself; the accessory nature of the obligation to the principal debt and its content are examined.

Frequently Asked Questions

Can a suretyship be created orally?

No. The written form and the handwriting elements required by law are important for validity.

Can the surety be pursued directly in every case?

It varies according to the type of suretyship and the conditions for recourse in the law. Simple and joint and several suretyship are not the same.